Canadian currency reaches three-month high on growth prospects

Canadian dollars Canadian dollars

Aug. 15 (Bloomberg) -- Canada’s dollar climbed to the highest level since May versus its U.S. counterpart, trading stronger than parity for a ninth day, amid speculation North American economic growth will sustain the nation’s exports.

The currency has gained versus the majority of its 16 most- traded peers this month as data showed jobs and retail sales in the U.S., Canada’s biggest trade partner, rose more than forecast. The euro has fallen versus the Canadian and U.S. dollars amid concern European leaders are struggling to resolve their debt crisis. U.S. industrial production gained more than forecast in July, a report showed today, and commodities rose.

“Canada is still seen as a safe place to park money on a relative basis these days,” Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets unit in Toronto, said in a telephone interview. “The U.S. industrial production number came in slightly better than expected; that was a little bit Canada-supportive.”

The Canadian currency, nicknamed the loonie for the image of the waterfowl on the C$1 coin, appreciated 0.3 percent to 98.89 cents per U.S. dollar at 12:29 p.m. in Toronto. It touched 98.88 cents, the strongest since May 4. One Canadian dollar buys $1.0112. The two currencies reached a one-for-one basis on Aug. 3 for the first time since May.

Standard & Poor’s GSCI index of raw materials increased 0.5 percent, and crude oil for September delivery traded at $93.66 a barrel in New York. It touched $94.72 on Aug. 8, the highest since May 15. Raw materials including oil account for about half of Canada’s export revenue, and crude is its biggest export.

Bonds Fall

Government bonds fell for a third day, pushing yields on the 10-year benchmark security up eight basis points, or 0.08 percentage point, to 1.94. It was the highest level since May 22. The price of the 2.75 percent notes maturing in June 2022 slid 75 cents to C$107.22.

Canada auctioned C$3.4 billion ($3.44 billion) of five-year debt today, attracting C$8.8 billion in bids and drawing an average yield of 1.538 percent. The securities carry a 1.5 percent coupon and mature in September 2017.

The loonie extended gains after Federal Reserve data showed U.S. industrial production increased 0.6 percent in July, after a revised 0.1 percent gain in June that was smaller than previously reported. Economists in a Bloomberg News survey forecast a 0.5 percent rise. Manufacturing, which makes up about 75 percent of total production, advanced 0.5 percent for a second month.

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